Shares in jewellery retailer Michael Hill fell more than 9% yesterday after reporting that it underpaid staff by up to $25 million over the past six years.
The underpayment was revealed in an update issued to the ASX yesterday separate to the company’s now usual end of financial year trading update.
The shares ended down 8.7% at 52 cents.
The company said it had started a full remediation program after an initial review of Australian retail employment contracts and rostering practices showed non-compliance with some requirements of the General Retail Industry Award for a number of store-based staff.
The review was triggered by new CEO Daniel Bracken, a former Myer and Specialty Fashion executive who joined the jeweller following the departure of CEO Phil Taylor late last year.
The review, which was completed with the assistance of PriceWaterhouseCoopers, revealed a historic misapplication of the general retail award over a number of years.
The Company said it had now started a more detailed review of all employee records, rostering practices and payments.
“While the more detailed review will be undertaken with urgency, due to the volume of data to work through and the complexity of the issues, we expect this program will still take several months to complete,” the company said yesterday.
“The remediation of these issues, which occurred over the last six financial years, is estimated to be a one-off cost in the range of $10m to $25m. It is not presently anticipated that rectification and remediation will have any material impact on the underlying earnings of the Company for FY20 or any future financial years.”
In the trading update, the company said same-store sales were flat at +0.1% and total sales were down by 0.8% for the June quarter of 2018-19.
“This final quarter same-store sales result of +0.1% demonstrates sales momentum recovery when compared favourably against prior quarters (Q1 -11.0%; Q2 -2.9%; Q3 -1.5%),” the company said in the update yesterday.
“Ten new stores were opened and eleven under-performing stores were closed along with five Emma & Roe stores during the year, giving a total of 306 stores trading at 30 June 2019 (including the one remaining Emma & Roe store).”
“The Australian segment finished the year with total same-store sales of -5.9%, a recovery from FY19H1 of – 8.8%. Four stores opened during the year, and eight underperforming stores were closed, giving a total of 168 stores trading at 30 June 2019.
“The New Zealand segment saw total same-store sales of -4.7% for the year, recovery from FY19H1 of -6.4%. Two stores closed and two stores opened during the year, giving a total of 52 stores trading at 30 June 2019.”
“Canadian stores delivered total same-store sales of -1.6% for the year, recovery from FY19H1 of -2.7%. Sales across all stores lifted by +1.5% for the year. One store closed and four stores opened during the year, giving a total of 86 stores trading at 30 June 2019,” the company said in yesterday’s update.